Furlough warning: Salary cuts may become ‘socially acceptable’ – keep an eye on your pay | Personal Finance | Finance


Furlough rules have been completely upended in recent months, with Rishi Sunak launching the coronavirus job retention scheme to keep the economy afloat. The scheme itself was extended but it will come to a definitive close in October.

Many individuals and organisations have voiced worry over the scheme ending, as employers across the UK may let staff go as they struggle with costs.

However, in an effort to limit this outcome, the chancellor announced yesterday that employers could get bonuses if they keep furloughed staff on.

As Mr Sunak confirmed yesterday in parliament: “So the furlough will wind down, flexibly and gradually, supporting businesses and people through to October.

“But while we can’t protect every job, one of the most important things we can do to prevent unemployment… is to get as many people as possible from furlough back to their jobs.

READ MORE: UK furlough scheme: Sunak unveils plan to stop soaring unemployment

Unfortunately, Katie Maquire, a partner at national law firm Devonshires, predicts that the end of the furlough scheme would actually create an environment where salary reductions become socially acceptable.

As she explained: “We have already seen some employers implement permanent pay cuts because of the gloomy economic outlook. Whilst the Coronavirus Job Retention Scheme – the Furlough Scheme – is in place, it is acting as a financial crutch for many businesses to help keep them going.

“During lockdown, without the Furlough Scheme, many employers would have had to make employees redundant. The Scheme has therefore done what the government said it would and has kept employees and workers employed during the pandemic.

“However, with the Furlough Scheme ending on October 31 2020, if the UK enters a recession as currently predicted, many employers are going to have to make some very tough decisions and more permanent pay cuts are likely across many sectors.

Katie went on to urge employers to consult with their employees before making any decisions and ask them for consent before reducing salaries.

She commended UK businesses for their ability to show pragmatism in the current environment and this frame of mind should be held onto as we return to a relative normality.

Should workers find themselves coming back to a lowered income however, they may be able to still rely on the state for support.

Under current rules, Universal Credit can be claimed by most people who have found themselves out of work or face low incomes.

If claimants are eligible, they will be provided with an income that will be based on their specific circumstances.

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